Chinese shares finished with steep losses on Monday as jitters continued after last week's market gyrations.

The Shanghai Composite closed down 5.3% at 3,016.7 points.

In Hong Kong the benchmark Hang Seng index closed down 2.8% at 19,888.5.

Investors are keeping a close eye on movements in the Chinese currency, which is managed by the government.

The guidance rate for the yuan was raised for the second session in a row.

Currency fears

But that failed to reassure investors worried about further weakening in the future.

"Global markets are still in the grips of China fears, and it is uncertain whether the Chinese government can do enough to reassure global investors," said IG's Angus Nicholson.

"The open of the Chinese cash market today has looked like a battle ground between state buying and investors still trying to get out, and has done little to ease the sense of fear seen in other Asian equity markets," he added.

Traders were also unnerved as Hong Kong's inter-bank lending rate for the offshore yuan (CNH) spiked to a record high.

Analysts said the spike was due to a lack of yuan in the Hong Kong banking system - a situation due possibly to intervention from China's central bank in an attempt to support its currency.